Leading Risk Management Issues for the Construction Industry

In today’s rapidly evolving construction industry, effective risk management and insurance strategies are more critical than ever. This session at RIMS 2025 featured emerging trends and key challenges in construction risk. Through a collaborative discussion, risk professionals highlighted recent challenges.

Presenters included:

• Cheryl Berman, Risk Manager at Brady West, Inc.
• Ted Dann, Real Estate & ESG Practice Leader at RE-Risk Advisors

Mega Projects
Projects that employ multiple general contractors, a large footprint with several buildings, and that take many years to complete are considered “mega projects.” Often insuring these projects takes months of complex underwriting. Mega projects are also ripe with the use of new technologies for items like how to pour a foundation, however, risk managers complain that the insurance applications are dated and often not sophisticated enough to consider these new technologies in the underwriting process. Sometimes these accelerated designs are also evolving as the project progresses. When this occurs, it is important to notify the insurance carrier otherwise claims may not be covered.

Backlog Management
General contractors often want to know pre-qualification issues to ensure they have the manpower to complete the project. This can be difficult to quantify because it is ever changing. There are pre-qualification tools and software available that can help. In some organizations, pre-qualification falls under risk management, so they will request loss runs as a planning resource and track the sub-contractors working on the projects. They are not looking at where they fail, but rather how they can help come up with strategies to take the pressure off of large projects and where there might be vulnerabilities. This can include evaluating how a project is managed, staffed, and billed to uncover if there are signs of cash-flow issues. These type of issues can be leading indicators of future potential problems.

Labor Shortage
Currently the construction industry is experiencing a large labor shortage. This seems to be consistent with union and non-union trades. Construction is competing with other industries that are simply easier on the workforce, include less labor-intensive duties, and with competitive or better pay. The industry has been trying to recruit from other industries where people have similar abilities, for instance, the automobile industry. They are also trying to recruit and train at the high school level to attract younger generations to the trade.

Worker Wellness
This not only includes physical wellness, but mental wellness as well. In fact, mental health has been such an issue in the construction industry that some companies are having their managers go through mental health courses to at least help identify issues in their workforce.

Supply Chain
Tariffs are probably going to create supply chain difficulties in the near future. Some companies are beginning to consider building language into their contracts to address this issue. Force majeure will only cover this for a short period of time, so this does not solve the problem. Trying to anticipate prices for raw materials is difficult. Some companies are adding it to the guaranteed maximum price (GMP) in their contracts as an allowance item to cover this unknown.